Chinese e-commerce giant JD.com is raising its stake in Dada Nexus Limited, investing $800 million in the on-demand delivery company’s newly issued ordinary shares to take majority ownership of the company. JD.com now owns 51 percent of all Dada Group shares.
With the investment, JD.com aims to help both companies further diversify their retail services and enable its partners to optimize cost, efficiency and experience and accelerate their intelligent digital transformation.
“We have long maintained close cooperation with Dada Group to jointly provide integrated online and offline solutions for the retail industry, and to enhance the intelligent digitalization capabilities of our partners,” said Lei Xu, CEO of JD Retail. “Our increased investment will facilitate both sides to promote the expansion of on-demand retail and delivery, as well as omnichannel collaboration.”
Dada operates two separate local on-demand platforms: JDDJ (JD Daojia), an online marketplace for retailers and brand owners, and Dada Now, a delivery platform open to merchants and individual senders across various industries and product categories.
JDDJ generated gross merchandise value of RMB 25.3 billion ($3.9 billion) across its platform in 2020, an increase of 107 percent year-over-year from RMB 12.2 billion ($1.9 billion) in 2019, while Dada Now saw 1.1 billion deliveries for the year, a 46 percent jump from the 753.8 million carried out in 2019.
In a recent quarterly earnings call, Philip Kuai, chairman and CEO of Dada Nexus Limited, cited Iresearch data that JDDJ was China’s largest local on-demand retail platform in 2020, with market share increasing to 25 percent from 21 percent in 2019. Additionally, Dada Now remains the largest open on-demand delivery platform in China, with market share increasing to 25 percent in 2020 from 19 percent the year prior.
“We are excited to further deepen strategic cooperation with JD.com,” said Kuai. “Leveraging JD’s devoted strategic support, we will better fulfill demands for local on-demand retail and its delivery on JD, covering various scenarios and categories, and expand our omnichannel cooperation. Together, we will continue to provide consumers with superior experience, empower retail and brand partners and achieve a win-win for all.”
JD.com first acquired 47.4 percent of Dada Nexus Limited in April 2016 in a transaction that merged the online giant’s JD Daojia “online-to-offline” (O2O) supermarket platform with Dada’s crowdsourced last-mile delivery platform. In 2018, JD.com and Walmart joined forces to raise another $500 million for the platform.
In Dada’s fourth-quarter earnings call, Kuan touted JDDJ’s fulfillment updates, which have integrated warehousing, picking and delivery in a “systematic, digitized and standardized fashion,” to significantly improve operating efficiencies and reduce costs.
In 2020 alone, fulfillment expenses for JD.com, which primarily include procurement, warehousing, delivery, customer service and payment processing expenses, increased by 31.7 percent to RMB 48.7 billion ($7.5 billion) from RMB 37 billion ($5.7 billion) for the full year of 2019.
Last year, the company also invested $100 million in sourcing and logistics management company Li & Fung to further develop its digital supply chain.
JD’s logistics unit is so vast that it filed for an IPO of its own through the Hong Kong stock exchange in February. The company has not specified the amount it hopes to bring in through the offering, but JD is estimated to raise about $5 billion by floating shares of the unit, with the total value of JD Logistics possibly reaching $40 billion, according to a report by Bloomberg.
While the company’s deliveries largely concentrate within China’s “Tier 1” and “Tier 2” cities, JD.com sees more of an opportunity to crack the country’s “lower-tier cities” with both Dada-operated platforms seeing growth in those regions. The JDDJ platform entered 200 new cities alone in the fourth quarter. GMV in lower-tier cities increased by 150 percent year over year during this quarter for JDDJ, according to Kuan.
The closing of the transaction is subject to satisfaction of customary closing conditions and procedures, including applicable governmental filings, and there can be no assurance that clearance from applicable governmental authorities will be granted. JD.com has agreed not to sell, transfer or dispose of any shares acquired in the transaction for six months after the closing.